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Wednesday, September 22, 2010

Here Comes the Blather-panic ?

"Doubts and mistrust are the mere panic of timid imagination, which the steadfast heart will conquer, and the large mind transcend." - Hellen Keller

In case you missed my little 'shpeel' earlier this morning in the twitter stream ... allow me to expound upon my thoughts and points here.

First of all ... let's begin with the fact that the U.S. Dollar has been falling for a few months now ...

U.S. Dollar Index Futures
Daily Chart


Now, allow me to interject a secondary observation.

Personally, I've never understood why the Federal Reserve did not work harder to marry volatility / and understood seasonal pressures to 'hide' effects of their efforts at market guidance. This is much different than what occurred in 2007. I have often stated that in 2007, the Fed shared much of the blame for the inflation problem that occured due to their exacerbating the issue by 'throwing gasoline onto the fire' (pardon the pun) in the oil markets by their prime Fed rate cutting efforts during a seasonally bullish time for oil prices.

High inflation was the natural result, and long time blog readers and subscribers to the YouTube channel know that I was all about the 110 Oil call options in the futures markets.

So why did not the Fed take such well understood seasonal pressures into account when making such decisions and statements? I'm by no means saying that 'my thoughts are better'. I'm an economic and political neutral, as well as a Christian. But I've always wondered why they did not take a more serious view of seasonal pressures in the market.

But now? Now, perhaps, all of that is beginning to change.

So let's take this back to the dollar.

In brief? The dollar falling off sharply during the month of September?

It's seasonally very typical. Very typical.

It has nothing to do with their statements on Tuesday. It has nothing to do with 'investors fleeing dollars'. If you look at a 5 year seasonal average, a 15 year seasonal average, or a 30 year seasonal average, the U.S. Dollar always falls in the last half of September. In fact, a few weeks ago I was writing in my newsletter about building a bearish consensus in the U.S. Dollar, and selling any rallies. I didn't personally take advantage of that trade, as I was in some other markets (I don't trade too many markets simultaneously). But it's something I've seen coming for a while, along with this rise we've seen recently in Gold.

"Seasonally, the U.S. Dollar is very weak for the month of September, and I've been somewhat encouraged that it has held up as well as it has. However, it should be noted that the current resistance level, or region of 82.350 is being tested. We might rally from 7:00 am est this Monday towards the 82.90 region; it wouldn't surprise me. If that turns out to be the case, then I wouldn't mind taking a short trade if I see the market congest at that level" - Airelon's Market Tactics, September 13, 2010

Back to the current state of dollar.

This September's U.S. Dollar sell off usually leads to all sorts of blather-panic fun (thanks to Echo for that term, I find myself using it all of the time now) by the 'dollar will crash / hyperinflation' folks by each November. Again, this is typical each year. Which is usually when I begin to build my bullish dollar consensus about that time, if other economic conditions merit.

So to be clear ... I see no "dollar crash" as imminent with this recent sell-off. In fact, I was encouraged by some of the Fed's statments. What I see in the result of the U.S. Dollar Index is a very usual, very typical move in the capital markets. In addition, simply because Gold is rallying to new highs, does not have me concerned in regards to inflation. Again, this Gold rally is very typical for the month of September. Personally, I feel that you'd have to be exceedingly foolish to try to short Gold in September. Regardless, Gold is one of the last things I look at when it comes to inflation that affects us all. I'm much more concerned about oil, the bond markets, and grain prices. You know ... the things that really and truly affect our daily lives.

So all of my above comments are not to say that I do not have some inflationary concerns. I do. I do feel it's building. It's something I am keeping my eyes on, and trust me ... if I feel that inflation is about to become a major worry, I will talk bout it here.

But a dollar crash?

Sorry ... no.

Now, am I basing these ideas solely around the fact that this year, seasonal pressures coincide with the recent FOMC statements and rate decision?

No.

I'll also talk more in the future regarding financial events in the capital markets as they relate to non-linear anti-periodic functions.

* * *

Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 14 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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